Uber settles its self-driving car suit with Google. The price: a chunk of Uber

Uber suddenly settles with Waymo over bitter trade dispute

Author:
Marco della Cava and Elizabeth Weise, USA TODAY

Published:
7:26 PM EST February 9, 2018

UBER CEO Dara Khosrowshahi on October 31, 2017, for a meeting with Brazilian Finance Minister Henrique Meirelles in Brasilia, Brazil

Sergio LIMASERGIO LIMA/AFP/Getty Images

SAN FRANCISCO – In a sudden end to an increasingly bitter public skirmish over self-driving car trade secrets, Uber settled a lawsuit Friday brought by Waymo, Google's self-driving car company, giving up a stake to its rival.

As the fifth day of a trial was set to begin, Waymo announced the news in court. According to the terms of the settlement, it will receive 0.34% of Uber's equity at an earlier valuation high of $72 billion, which comes to about $245 million.

Japanese investment firm SoftBank and other partners recently took a large stake in Uber but at a new valuation closer to $50 billion. Google had been an early investor in Uber with a seat on its board. It brought the lawsuit a year ago.

The deal follows a week of testimony that often shined a spotlight on the competitive tactics of former Uber CEO Travis Kalanick, who led the company since its founding in 2009 until June.

In Uber's Friday statement, new CEO Dara Khosrowshahi — hired in August after Kalanick was ousted by investors because of mounting scandals — apologized to its competitor Waymo, agreed to pay the fine and promised Uber would clean up its act. Neither he nor Uber admitted to obtaining trade secrets.

"While I cannot erase the past, I can commit, on behalf of every Uber employee, that we will learn from it, and it will inform our actions going forward," Khosrowshahi wrote. "As we change the way we operate and put integrity at the core of every decision we make, we look forward to the great race to build the future."

Former Uber CEO Travis Kalanick leaves the Phillip Burton Federal Building on day three of the trial between Waymo and Uber Technologies on February 7, 2018 in San Francisco.

Justin Sullivan/Getty Images

The sentiment contrasted with the one from Uber co-founder Kalanick, who had testified about his recruitment of an ex-Google engineer whose alleged actions were at the heart of the dispute.

"As Uber's statement indicates, no trade secrets ever came to Uber," Kalanick said. "The evidence at trial overwhelmingly proved that, and had the trial proceeded to its conclusion, it is clear Uber would have prevailed."

"The settlement represents the desire of both companies to move past this issue and get on with the goal of developing self-driving tech," said Karl Bauer, executive publisher of Cox Automotive. Taking a slice of a rival's stock simply typifies the " 'frenemy' relationship pervading the modern tech industry," he said.

Making ride-hailing cars autonomous is critical to companies such as Uber and its rival Lyft, because paying the driver creates a business model with little room for profit.

Automotive manufacters have teamed up with tech start-ups over the past year, including Ford with Argo.ai, General Motors with Cruise and VW Group and Hyundai with Aurora, a new self-driving company started by former Google car tech lead Chris Urmson.

The turn of events followed four days during which Waymo, at least in open sessions, didn't appear to make much progress proving its accusation that Uber had stolen trade secrets for its own self-driving car program.

Google's Waymo is the widely acknowledged leader in self-driving technology.

Waymo

Waymo lawyers painted former and current Uber employees as shady at best and conspiratorial at worst. But given the first days were dedicated largely to providing evidence of the theft of Google documents, they had not yet highlighted what unique LiDAR technology was developed by Waymo engineers or showed evidence that Uber used that information to create its LiDAR.

LiDAR uses lasers atop a self-driving car to help the vehicle "see" its environment. Though the technology is sophisticated, it is available for purchase from suppliers such as Velodyne.

Judge William Alsup made it clear the trial wasn't about Uber's business actions but whether Uber's LiDAR was based on stolen information.

The price of the settlement may have been the clincher. Waymo had wanted at least $1 billion in damages and a public apology from Uber, Reuters reported in October. Uber had rejected those terms, it said.

Settlement caps a dark Uber year

Khosrowshahi has been largely in course-correction mode after a brutal last year. The company's executives, pushing full throttle on making Uber the most popular and dominant ride-hailing service, had cultivated a hyper aggressive culture that took little notice of regulations and standard business protocol.

Former Uber engineer Susan Fowler accused Uber in a blog post of being a toxic place for women to work, a post that was bracketed by reports of a range of questionable business tactics under Kalanick, including spying on rivals, intentionally fooling regulators, lying to business partners, sharing a customer's private medical history, and later, hiding massive data breaches.

Waymo's lawsuit said Uber was developing light detection and ranging systems based on information stolen by former Waymo employee Anthony Levandowski, who started a self-driving truck company in early 2016 that Uber bought for about $680 million in August of that year.

The trial rehashed how Kalanick, who has called Levandowski a "brother from another mother," wooed the engineer while he was at Google. Levandowski was frustrated by the pace of Google's program and wanted to start his own company. Kalanick encouraged his venture, and eight months after Otto was founded, Uber bought it.

The lawsuit alleged that Levandowski downloaded about 14,000 files from Google's servers before leaving the company. These files allegedly contained the secret LiDAR information that Waymo accused Uber of using to speed the progress of its self-driving car team. Google has worked on autonomous cars since 2009 and Uber since 2015.

Khosrowshashi said he didn't think Uber stole trade secrets from Waymo, but some employees may have inappropriately taken files from Google before they left.

Waymo said in its statement Friday that it was "committed to working with Uber (Google is an early investor in the ride-sharing company) to make sure that each company develops its own technology."

A grey Volvo SUV with Uber logo on it.

Getty Images

What remains unclear is whether the lawsuit or the verdict affects Uber's self-driving car strategy.

Khosrowshahi's statement says his company will be "taking steps with Waymo that ensure that our LiDAR and software represents just our good work," suggesting some kind of tech monitoring arrangement.

If Uber's LiDAR never had any Waymo trade secrets, the company should be able to proceed as planned with its various self-driving car tests. If that's not the case, then it would have to rebuild its LiDAR or retrofit its cars with LiDAR purchased on the open market, a potentially costly and time consuming move.

Waymo filed its lawsuit after it mistakenly received an email meant for Uber executives that included images of a LiDAR-related computer chip that Waymo said was identical to its own design.

Bro culture spotlight

Court testimony put a spotlight back on not just Kalanick, who has been largely out of public view in recent months, but also on the "bro culture" atmosphere that permeates many tech companies.

Among the many emails and text messages that were part of the trial was one message Levandowski sent Kalanick containing a link to a short video of Michael Douglas' "Greed is Good" speech from Wall Street.

Waymo lawyers convinced Alsup to allow them to play the clip, implying that Kalanick, like Douglas' character, Gordon Gekko, was willing to do anything in the pursuit of riches.

Notes from a meeting Kalanick had in 2015 included a list of things the CEO wanted such as a "pound of flesh."

Uber drivers now will be alerted whenever a ride will take at least 45 minutes.

Uber

The Shakespearean term has aggressive overtones. When asked on the witness stand why he used it, Kalanick shrugged: "I don't know specifically. It's a term I use from time to time. I don't know."

Khosrowshahi has tried to distance the company from the culture of his predecessor. He's looking to improve Uber's relationship with drivers, negotiate with cities such as London that threaten to boot the service, and generally present a public face that contrasts with the take-no-prisoners approach of his predecessor.